By Abhirup Roy

Tesla (NASDAQ:TSLA) CEO Elon Musk stunned investors and analysts with plans to grow vehicle sales by 30% next year, buoyed by a new, cheaper model and enthusiasm for self-driving software. However, delivering on that promise would surprise much of Wall Street.

Musk's 2025 forecast and improving profit margins sparked the biggest jump in Tesla shares since May 2013, when the company posted its first quarterly profit. This encouraged investors, as he focuses on the basics of his business while working on a years-out robotaxi.

Analysts and industry experts noted that Musk faces flagging demand for Tesla's sparse and aging lineup, a global slowdown in EV sales growth, and rising competition in key markets like China and the U.S.

His forecast of 20-30% growth, after a negligible bump this year, is roughly double what Wall Street has been expecting. Deutsche Bank predicted 12% growth next year, even with a sub-$30,000 new model and a refreshed Model Y. RBC analysts maintained their 13% growth forecast.

"There's hardly an analyst anywhere in the world who's going to agree with 20% growth in the company next year," said Sam Fiorani, vice president at AutoForecast Solutions. "Tesla, aside from this quarter, has been seeing a slowdown in its demand for its products. And one quarter is not a trend."

Tesla did not respond to a request for comment.

Global electric vehicle sales have fallen short of lofty expectations, and growth has moderated in recent years. However, competition is heating up. The International Energy Agency estimates global EV sales to grow about 23% to 17 million this year, down from a 35% rise last year and over 50% growth in 2021.

China remains the biggest market, accounting for nearly two-thirds of the sales this year, followed by Europe with over a fifth and the U.S. with about 10% of sales.

While U.S. tariffs are likely to keep Chinese models out of Tesla's main market, players including China's BYD dominate their domestic market and are targeting Europe. U.S. carmakers fear being undercut by Chinese prices, emphasizing Tesla's focus on a relatively low price for its next model. "Being able to beat BYD at its own game is a non-trivial undertaking," said Pat Ryan, founder of car shopping platform CoPilot. "It's really strategic for them, but it's not going to be easy."

Affordability for customers will continue to be a challenge next year, with auto loans expected to be expensive despite interest rate cuts. This issue may worsen if Donald Trump becomes U.S. President and cuts tax incentives for EV buyers, which are as much as $7,500 a vehicle.

Tesla's own lineup includes its best-selling Model Y, due for a refresh, and the trapezoidal Cybertruck pickup, whose production is rising. Musk has also increased promotions for Tesla's Full Self-Driving software, anticipating that its adoption will stimulate sales in 2025.

Cybertruck production has reached volume levels and is profitable, a positive sign for next year. However, analysts like Bernstein, which forecasts 16% growth next year, indicate that 2025 success depends on the design of new affordable cars and production ramp-up.

After years of rapid growth, Tesla sales declined in the first two quarters of 2024. Incentives and financing deals have drawn some back, but Musk has stated Tesla will deliver only a few more vehicles this year than the record 1.8 million in 2023.

Musk's controversies surrounding his increasingly right-wing politics and public statements have alienated some potential buyers. Nearly a third of consumers surveyed by Edmunds in August said they were less likely to purchase a Tesla because of Musk.

Investors are primarily focused on deliveries, margins, and the new affordable cars, monitoring the company's performance quarter by quarter. Will Rhind, CEO of global ETF issuer GraniteShares, stated shareholders will ensure that the company delivers on its promises.